Consider a fully amortizing PLAM as follows. $100,000 Mortgage 7% Interest 30 Years Monthly Payments Loan balance
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Question:
Consider a fully amortizing PLAM as follows.
$100,000 Mortgage
7% Interest
30 Years
Monthly Payments
Loan balance adjusted for CPI every year
This loan was made 5 years ago, and now the CPI unexpectedly increases by 10%. As a result, the market interest rate increases from 7% to 10%.
How much value does this mortgage lose if it can be sold on the secondary market?
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